As a competent authority, the European Central Bank (ECB) is required to carry out annual stress tests on supervised entities in the context of its Supervisory Review and Evaluation Process as set out in Article 100 of CRD IV.
The draft European Banking Authority (EBA) Guidelines on institutions’ stress testing1 leave room for competent authorities to follow various approaches.
The ECB will carry out a stress test exercise on climate risk as its annual supervisory stress test for 2022.
The methodological requirements described in the following sections of this document are to be considered as a uniform methodology for conducting a bottom-up exercise and are not intended to form the basis of any future regulations.
This document draws on several sources, including the ECB Guide on climate-related and environmental risks2 and the EBA Report entitled “On management and supervision of ESG risks for credit institutions and investment firms”